Reuters and BAE contribute to FTSE fall

Media giant Reuters and defence firm BAE Systems were the chief culprits behind a heavy fall by the FTSE 100 Index today.

Media giant Reuters and defence firm BAE Systems were the chief culprits behind a heavy fall by the FTSE 100 Index today.

Shares in Reuters dropped more than 11% as investors reacted with dismay to an unchallenging 5% target for total revenues growth in the current financial year, while BAE Systems also failed to convince the market that its prospects were bright.

It meant the Footsie retreated from the four-year high of the previous session to end the day 36.4 points lower at 5836.

A further dent to market morale was delivered by a subdued start to trading on Wall Street as US investors trimmed their positions in the wake of the latest jobs data, which indicated that interest rates may have to rise further.

In London, BAE Systems fell 26.25p to 421p because investors had been hoping for a more bullish outlook, although profits were in line with expectations following a 16% rise.

Centrica was also prominent on the fallers board, easing 10.5p to 285.75p on the day that it announced an 11% rise in profits to £1.5bn (€2.2bn).

With high wholesale gas prices suggesting there is no quick fix to losses at British Gas over the past six months, investors banked profits after the stock was driven higher in recent weeks on speculation that Russian energy giant Gazprom will bid.

But the declines by both companies were not as severe as that of Reuters, which slumped more than 11% or 51.75p to 399.5p after fourth-quarter earnings fell short of hopes and analysts worried that restructuring costs would be higher than first thought.

It was the first time that Reuters shares have closed below the 400p mark since the end of November.

A cushion was provided to the market by the banking sector as investors anticipated good news from lenders ahead of a flurry of results. Royal Bank of Scotland rose 20p to 1838p and Halifax and Bank of Scotland owner HBOS ticked 6p higher to 1046p.

Outside the top flight, cosmetics retailer Body Shop advanced 7% or 18p to 265p after beauty house L’Oréal said it was mulling a cash bid.

And an improving sales trend at Laura Ashley lifted its shares by 10% or 1.5p to 17p, fuelling hopes that the once-mighty retailer has turned a corner after several false dawns.

Chorion – the firm that owns the rights to classic brands such as Noddy - lifted 10.5p to 424p after a £110.7m (€162.7m) management buyout backed by private equity firm 3i was agreed. Its shares had surged 20% yesterday after talks were confirmed.

But news that Colt Telecom is planning to replace debts with £300m (€440.9m) of new equity prompted many investors to withdraw from the stock. Colt shares fell 7% or 4.5p to 60.5p.

The biggest Footsie risers were Cairn Energy up 77p at 1957p, Capita Group ahead 14.5p at 455p, Brambles Industries up 13p at 419.75p and Shire ahead 27p at 902p.

The biggest fallers were Reuters down 51.75p at 399.5p, BAE Systems off 26.25p at 421p, WPP Group off 23p at 619p, Centrica down 10.5p at 285.75p.

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